What does the Heritage Foundation have to say about saving Social Security:Study released May 10, 2011 (Part 3)

The problem with social security  

David John, a Senior research Fellow at the Heritage Foundation, explains his position on Social Security as it relates to taxes and health care. He suggests it would be a good solution for the government to raise the age of retirement.

“Saving the American Dream: The Heritage Plan to Fix the Debt, Cut Spending, and Restore Prosperity,” Heritage Foundation, May 10, 2011 by  Stuart Butler, Ph.D. , Alison Acosta Fraser and William Beach is one of the finest papers I have ever read. Over the next few days I will post portions of this paper, but I will start off with the section on Social Security. I am also going to give attention to the thoughts of Milton Friedman on the subject too. Here is the second portion:

Over the next 75 years, the program has promised to pay $7.8 trillion more in benefits than it will receive in payroll taxes. The only way that future retirees can collect all of the benefits promised to them is to make their children and grandchildren pay massive amounts of additional taxes.

Without Reforms, Entitlements will consume all Tax Revenues

Heritage proposes to solve these problems and strengthen the Social Security system by tightening its benefits and returning it to its original purpose: a guarantee that older Americans won’t fall into poverty. Heritage proposes to make Social Security “real insurance” for Americans as they reach retirement.

This reform means that Social Security’s promises in the future will change in several ways:

  • Social Security will gradually be transformed from an “income replacement” system back to its original purpose of guaranteeing seniors freedom from fear of poverty and assuring a decent retirement income. This means that Social Security benefits will evolve over time into a flat payment to those who work more than 35 years—a flat payment that is sufficient to keep them out of poverty throughout their retirement.
  • Because the new Social Security is a real insurance system, designed to protect seniors from poverty, retirees with high incomes from sources other than Social Security will receive a smaller check, and very affluent seniors will receive no check. This transparent way of income-adjusting benefit checks will replace the method used today, whereby the checks of even modest-income seniors are taxed and thus reduced.
  • To help make up the difference between the new Social Security benefit and what workers may desire for a more comfortable retirement, our plan will create greater incentives for workers of all income levels to save more for retirement. These savings will supplement their Social Security and create a more secure retirement.
  • Americans live much longer than they used to. While this is good news, it means that they are spending a much higher proportion of their lives in retirement. Regrettably, these longer retirements play a major role in Social Security’s financial problems. For this reason, the Social Security retirement ages will be raised gradually and then indexed to life expectancy. This will create a more reasonable balance between the number of years a person works and the number of years one receives Social Security benefits.
  • To encourage people to stay in the workforce longer, those who work beyond full retirement age will receive a higher level of after-tax income during the period when they are not claiming benefits.

This new Social Security system is reasonable, predictable, and affordable. It focuses resources on those who need the most help while providing complete protection against poverty for all seniors who qualify for full benefits.

Post a comment or leave a trackback: Trackback URL.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.

%d bloggers like this: